How do you rebuild a country decimated by four decades of war and embargoes? Following the withdrawal of the U.S. military, Iraq faces many challenges, from oil revenues captured by the militias and endemic corruption to religious segregation. However, there are glimmers of hope for the country's future.
BAGHDAD — With a vast office located at the top of a tower fiercely guarded by the army and a bell to call the staff, Khalid Hamza Abbas is obviously a powerful character, decked out in an impeccable suit. Abbas runs the Basra Oil Company (BOC), the national company responsible for the exploitation of the oil fields in the province of Basra, in the very south of Iraq, from which four million barrels of crude oil flow daily. It’s the equivalent of 4% of world demand and 65% of central government revenue concentrated in a region of only four million inhabitants.
As he explains the profit-sharing scheme between the world’s major oil companies and his public enterprise, the 50-year-old with thin glasses is suddenly stopped dead in his tracks by the ringing of his telephone. He tries a joke to mask his suddenly worried face: "I'm going to ask you to leave my office for a few moments. If I haven't called you back in 10 minutes, call the police."
Clearly unannounced, Faleh al-Khazali, a member of a powerful Shia militia, bursts into the room with a toothy grin. One of his three bodyguards closes the door. What could the frail businessman and the newly elected member of parliament, who lost his eye in the fighting in Syria, have to say to each other?
Al-Khazali is far from his Baghdad constituency. He alone illustrates the headwinds blowing across the Iraqi economy as the U.S. Army packs up and lets the country stand on its own two feet. Torn between corruption, sectarianism and the curse of black gold, the land of ancient Mesopotamia will have to defy the laws of gravity to regain its lost prosperity.
Oil as lifeline
In many ways, however, the skies are clearing over Iraq. The recent victory against the Islamic State organization may have ended nearly four decades of wars and embargoes. The COVID-19 pandemic, after ravaging the economy and forcing the first devaluation since the American invasion of 2003, is loosening its grip and allowing world oil demand to resume its upward trend. According to the Organization of the Petroleum Exporting Countries, this increase should continue until the end of the 2030s. Iraq, the world's fifth largest crude producer, is counting on the windfall to rebuild, announcing recently that it would increase production by 40% by 2027.
A visit to the Zubair oil deposit, one of the country's largest in the middle of the desert, does not, however, leave the impression of an industrial site ready to conquer the world market. Old and decrepit, the operation shows several signs of leaks and spits thick black smoke into the sky.
"The construction of the gas compressor, which is supposed to reduce gas emissions, is very late," confides a local employee in the middle of half-ruined shacks. Management is clearly not keeping up with government ambitions. Jointly operated by the BOC and a European company, the enterprise should nevertheless increase its production by 50% in the next five years. It’s a logistical challenge that many consider to be unrealistic.
After-effects of endemic corruption
Adel Wakir, an engineer from Basra and an expert on oil issues, says, “Such an increase in national production has no chance of succeeding because Iraq is unable to make the necessary investments. You have to explore, drill, build new pipelines, terminals, reservoirs ... but the public deficit is so large that capital expenditure is systematically sacrificed."
Like the country as a whole, the Iraqi state is divided between Kurdish, Sunni and Shia factions, each of which holds one end of the chains of command, making the whole thing ungovernable. The Shia are in the majority among the population and now monopolize power after being excluded under Saddam Hussein's dictatorship from 1979 to 2003. The Shia have made the ocean of hydrocarbons in southern Iraq the rear base for their conquest of the country.
The oil industry, which represents nearly 60% of the national GDP, is thus under the control of more or less coordinated paramilitary organizations, often linked to Iran. They’re present at all stages of the value chain: trucks, terminals, cargo ships. Their reach even goes as far as the clandestine refueling of oil tankers anchored in the Persian Gulf.
Can Iraq wean itself off hydrocarbons? Nothing is less certain
"We do not control our borders," says Finance Minister Ali Allawi, who says he has launched a customs reform in recent months.
It’s a problem with seemingly no solution, given the size of the challenge. Even Baghdad's international airport, Iraq's gateway to the world, is said to be in the hands of militias. A businessman who regularly charters cosmetic products says he has to pay his customs taxes twice. "To export or import the slightest trifle, you have to grease the palms of the militias," he says on the condition of anonymity.
Endemic corruption deprives the population of revenues and international companies have to deal with it as best they can.
“If Iraq wants to succeed in the coming decades, it will have to attract and keep the major oil companies because they are the ones with the technical know-how," says Adel Wakir. Wakir says some of them are arriving with the baggage of large-scale diplomatic agreements, such as TotalEnergies and its recent $27 billion contract: "Without a strong will from the French government, I am not sure that TotalEnergies would have invested such amounts in such an unpredictable country."
And he points the finger at several competing players that have recently left Iraq, citing profitability problems and a shift toward renewable energy.
Guard at an oil rig in Iraq
Climate issue is new enemy
If corruption does not get the better of the Iraqi oil industry, the climate issue could soon finish the job. The huge black streaks in the skies around Basra are a reminder day and night that as the era of fossil fuels comes to an end, Iraq is on the wrong side of history.
“The global energy mix will soon work against us, and that is precisely why we are increasing production," says Finance Minister Ali Allawi. “We need resources to diversify the economy before it is too late.”
Can Iraq wean itself off hydrocarbons? Nothing is less certain, as its economy is suffering from dysmorphia. Competing with a huge civil service with extravagant privileges, burdened by the absence of the rule of law and hampered by a long overvalued currency and a starving banking system, the Iraqi private sector seems far from being able to take over.
From Basra to Baghdad, passing through the plains of the Tigris and Euphrates, one reality is clear to the visitor: Outside of oil and the civil service, there is no salvation for the Iraqi citizen. Umalawi, who is 80 years old, knows something about this. Standing at the entrance of her home, made up of bits of sheet metal, the matriarch has just returned from a day's work in the middle of the rubbish dump under one of the highways surrounding Baghdad and its 10 million inhabitants.
“Half of my grandchildren don't go to school and start working as ragpickers at a very young age," she laments in a setting worthy of the world's worst slums. “We live like animals and the situation is getting worse.”
Once one of the most advanced countries in the Arab world, Iraq is now said to have nearly a third of its population in poverty, second only to Yemen and Syria in the human development index.
Undermined by poverty and methodically divided by Saddam Hussein, Iraqi society has gradually found refuge in a segregated communitarianism that reached its peak during the civil war of 2006-08. Nearly 70,000 citizens were killed, while Sunnis and Shia split into separate neighborhoods. Although the resentments have since largely subsided, many still retain certain identity-based instincts that have been skillfully fed by a political class that has turned religious antagonisms into electoral gains.
Buying the loyalty of the flock
Not far from the runways of Baghdad airport, Ayad al-Jobouri, a tribal leader and former member of parliament, reigns supreme over a predominantly Sunni rural constituency. Living in a lavish residence and surrounded by dozens of henchmen, the political leader is also a distributor of agricultural equipment.
"The inhabitants of the surrounding area can borrow a tractor from me whenever they want," he declares in the midst of 50 machines as gleaming as they are impeccably aligned in his shed.
Is this a way to buy the loyalty of his flock? The man sidesteps the issue and prefers to accuse the Shia of destabilizing the Sunni strongholds with the government's checkbook: “The Shia control the state and capture its resources to buy the votes of Sunni areas," he says. “They are now the masters of the country, but they are divided and are beginning to tear each other apart between opposing factions."
This theory was confirmed on the same day by a crowd at the entrance to the Green Zone in Baghdad, the seat of the Iraqi government. Camped in a tense atmosphere, a few thousand young Shia militiamen coming from the four corners of Iraq are shouting about electoral fraud and demanding a recount of the votes from the October 10 legislative elections. The results were disastrous for pro-Iranian groups but favorable to Moqtada al-Sadr, a Shia nationalist leader who is expected to form a new government.
We are ready to fight if necessary.
“The elections were stolen!" says Ali Mohamed, 27, who arrived from Basra during the night. “The Sadrists also committed fraud, they must leave. We are ready to fight if necessary.”
After starting peacefully, the demonstration changed a few days later: In addition to scuffles with the security forces that left one dead and dozens wounded, three rockets were fired not far from the Green Zone. Further, two drone bombs attempted to eliminate Mustafa al-Khadimi, the outgoing Prime Minister.
“If a new war breaks out in Iraq, it will be internal to the Shia camp," says Mustafa Nasser, a journalist in charge of the Press Freedom Advocacy Association, an NGO defending the freedom of the Iraqi press. “While the militias may hold all the levers of power, they cannot prevent a fundamental phenomenon: More and more Iraqis aspire to look beyond the communitarianism narrative that's been hammered into them."
A Baghdad neighborhood of hope
In the southern suburbs of Baghdad, the sprawling "Dream City" neighborhood deserves its name for several reasons: running water, continuous electricity, city gas, garbage collection, quality schools, supermarkets, and playgrounds.
Partly financed by the Americans and built by a Korean consortium at the beginning of the 2010s, this new city of several hundred blocks of flats has enabled tens of thousands of lower middle class Iraqis to achieve a standard of living that was previously out of reach. One is Ahmed Karim, who moved in with his family as soon as the neighborhood opened in 2015: "This is the best place to live in Baghdad. The place is known throughout the country because it offers a glimpse of what positive things Iraq can achieve."
A few buildings away, Mohamed and Ibtissam, 55, explain that they jumped at the chance to escape the Sadr City suburb where they had always resided: "In our old neighborhood, there are only Shia and every mosque is held by a militia. It's a horror. Here, Sunnis and Shia live together in harmony. In fact, there is not even a mosque!”
Shopping malls are springing up.
Can Iraq free itself from separatism and focus its energies on its development?
"It is within reach," says journalist Mustafa Nasser. Look at the example of the revolution in 2019, during which hundreds of thousands of people of all faiths had demonstrated against governmental negligence and the militia grip.
"Although the movement was harshly repressed, it showed that extremism is in its last hours," Nasser adds.
While waiting for a new world to emerge, some parts of Baghdad are in full swing. The opera house is sold out every night. For the first time in 20 years, a music festival has been held in the mythical ruins of Babylon, an hour away. The shopping malls that are springing up all over the city are home to the world's biggest brands and are teeming with people as soon as night falls. With Saddam gone and ISIS defeated, the fragile peace seems to be putting wind in the sails of a middle class eager to invent a future for itself.
Walking on Al-Mutanabbi street, in the historic centre of Baghdad
Al-Anbar province now looks to the future
Nowhere is this frenzy of life more visible than in Al-Anbar province, an hour's drive north of Baghdad. Under the yoke of the Islamic State organization between 2014 and 2016, the region was emptied of its population and martyred by the violence of the reconquest battles led by the Iraqi army, but it is now the site of a spectacular reconstruction. The two million or so inhabitants have returned and a feeling of optimism is abundant throughout the region.
“We have turned the situation around," says Mahdi al-Nohman, head of the province's investment commission, from his state-of-the-art office. Al-Nohman says that in less than three years, he has granted nearly 300 business licenses for a total of $5 billion and created 11,000 jobs.
Wherever you look in the main cities of Anbar, Fallujah and Ramadi, large construction sites bristle with cranes: here a 30,000-seat stadium, there a gigantic shopping mall where Carrefour could soon occupy an entire level, further on a residential area with hundreds of single-family houses, a five-star hotel ...
While many of these contracts were awarded under murky conditions to contractors with opaque finances, the results are nonetheless impressive to onlookers strolling through Ramadi's bazaar.
Ahmed, the owner of a clothing store on the crowded main street, says, "We still lack schools and hospitals, but the roads are now excellent and electricity is more plentiful than before ISIS.”
"My son was unemployed before the war and now has a good job in construction," says Khalida Ali, 55, who came to buy fabric to furnish her newly renovated house. A member of the local UN mission confirms this success on condition of anonymity: "The fact that this region is entirely Sunni is not unrelated to its success. Here, there is no trace of militias, the population is homogeneous. But I believe above all that the war has provoked an electroshock among the population. They no longer want violence and are now looking to the future.”
Drawing inspiration from post-war Europe
Significantly, it’s a future that will now be written without America. The Biden administration has formally announced the end of the Pentagon's participation in combat operations against ISIS, which has been reduced to a few sleeper cells holed up in the desert between Iraq and Syria. Uncle Sam will nevertheless maintain a presence of about 2,000 soldiers on Iraqi soil, mainly for training purposes.
As he hands over the keys to his ministry, Ali Allawi says, “This presence may seem anecdotal, but it constitutes a sort of security umbrella for Iraq. The proof is that Kurds, Sunnis and a good part of the Shia are happy with this presence. With this assurance, Iraq must now focus on regional integration. This is the key to its future."
As the Middle East goes through a phase of relative respite, a chorus of politicians from all sides is calling for the post-war Europe model to be used to tie regional economies together through transportation, trade or the energy sector. For Iraq, the practical work could begin with the management of its major rivers, which have their sources in Turkey and Iran and whose flows are decreasing at the rate of the construction of dams upstream. Far downstream, Basra, suffocating under a severe water crisis and abominable pollution, could be the first test of Iraq's ability to make its way into the 21st century. From there, there will be no shortage of challenges.
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